America May Have Done the Impossible: Avoid a Recession
New YorkCNN — For the past couple years, all the smart money was on a US recession taking place sometime before the next presidential election. To be clear: That absolutely could still happen. In the world of economics, nothing is certain. But it’s looking extremely unlikely that America’s economy will go into reverse anytime soon.
Around this time last year, some of the most closely watched economists were all predicting a recession. As the year went on, they revised their forecast, instead penciling in a mild recession. But like the Federal Reserve, many began ditching the recession narrative altogether.
Which raises the question: How in the world did America avoid a recession? The Fed spent the past 20 months doing everything in its power to slow America’s economy down to combat runaway inflation with full awareness that it could inadvertently cause millions of Americans to lose their jobs.
It hiked its key interest rate target 11 times over that span — and at a historic pace. The Fed hadn’t raised rates so much and that fast since America’s last inflation crisis 40 years ago — and in 1980, the Fed hiked rates so high that it plunged the economy into the deepest recession since the Great Depression.
The Fed also sold off trillions of dollars of bonds and other debt it had bought up over the years, sapping demand for Treasuries, which pushed yields higher. Consumer loans, mortgages, credit cards and other lending rates tied to those yields surged, devastating America’s housing market, which is on pace for its worst year since 1993.